Abstract of Title: A legal form giving a condensed history of the property. Ask to see it before you buy property. Previous owners, prices paid and any encumbrances against the property are listed.

A/B Trust: A type of revocable trust used by couples. In this type of trust, two trust shares (trust share A and trust share B) are created. This allows the couple to divide their property and pass the maximum amount of property allowed to avoid federal estate taxes. One trust share is often referred to as the “marital deduction trust” and the other trust is often referred to as the “credit shelter” trust.

Adjudication: The decision of a competent court with regard to matters in dispute; to be distinguished from arbitration.

Administration: The care and management of an estate by a trustee or a guardian; to be distinguished from the settlement of an estate by an executor or an administrator.

Administrator (Administratrix): A person or institution appointed by the court to manage and distribute the estate of a person who dies intestate; a person appointed by the court to manage and distribute the estate of a person who dies testate, but who has not appointed an executor or whose executor has not qualified.

Affiant: A person who makes an affidavit or statement under oath or affirmation.

Affidavit: A document, sworn to and signed before a notary or other court officer, containing a specific statement.

Agent: A person who acts for another person by the latter’s authority. The distinguishing characteristics of an agent are (1) that he acts on behalf and subject to the control of his principal, (2) that he does not have title to the property of his principal and (3) that he owes the duty of obedience to his principal’s orders.

Amortization: Paying off a loan by regular installments.

Annual Exclusion: The amount of property the IRS allows a person to give to another person during a calendar year before a gift tax is assessed and/or a gift tax return must be filed. The amount is indexed for inflation and may change periodically. There is no limit to the number of people to which a gift may be made and qualify under the annual exclusion.

Appraisal: An estimate, often conservative, of the worth of the property based on market value.

Assets: (1) The property of a deceased person subject to the payment of her debts and gifts. (2) The property in a trust account.

Ascertainable Standard: This IRS-defined standard for the discretionary distribution of trust principle that will keep the property out of the beneficiary’s estate for tax purposes. The standard is generally expressed as purposes related to the beneficiary’s “health, education, maintenance and support.”

Attest: To serve as a witness to; as, to attest a will or other document.

Attorney at Law: A person who is legally qualified and authorized to represent and act for clients in legal proceedings; to be distinguished from attorney in fact.

Attorney in Fact: A person who, acting as agent, is given written authorization by another person to transact business for him out of court; to be distinguished from attorney at law.

Basis: A tax term which refers to the cost or acquisition value of a property, used to determine the amount of capital gain or loss upon the sale of the property.

Beneficiary: A person or institution named to receive property or property benefits.

Bequeath: To transfer personal property by will.

Bequest: That which is left by will.

Bona Fide (adj.): In good faith; as, a bona fide transaction.

Breach of Trust: Violation of a duty of a trustee to a beneficiary.

Burden of Proof: The duty of proving a position taken in a court of law. Failure in the performance of that duty calls for judgment against the person on whom the duty rests. Thus, the burden of proof that the paper writing is not the valid will of the testator is upon the person who contests the will.

Buy-Sell Agreement: An agreement between the owners of a business that provides that the shares owned by any one of them who dies or withdraws from the business shall be sold to and purchased by either the remaining co-owners or by the entity itself at a value or formula previously agreed upon by the parties and stipulated to in the agreement.

Bypass Trust: Also called a “credit shelter trust,” “family trust” or the “B trust” in A/B trusts where the A share is used to fund the marital deduction. This vehicle is used to minimize the combined estate taxes payable by spouses. At the death of one spouse, the estate is divided into two parts, with one part placed in trust to benefit the surviving spouse without being taxed at the surviving spouse’s death and one part passing outright to the surviving spouse or placed in a marital deduction trust.

Capital Gains (and Losses): The difference between purchase price and selling price in the sale of assets. The computation is used primarily in tax computations.

Certificate of Title: A document usually provided by a title company or attorney which certifies current ownership of a piece of property.

Charity: An agency, institution or organization in existence and operation for the benefit of an indefinite number of persons and conducted for educational, religious, scientific, medical or other beneficent purposes.

Charitable Lead Trust: A trust in which income is paid to a designated charity (or charities) for a period of years or a measuring lifetime and then the remainder is returned to the grantor or someone else (such as heirs).  This type of trust is subject to the Rule Against Perpetuities because it is not completely charitable.

Charitable Remainder Trust: A trust in which one or more non-charitable beneficiaries receive a specific amount of income from the trust for a term of years, with the remainder reverting to a designated charity (or charities) thereafter. A charitable remainder trust can either be a CRAT (charitable remainder annuity trust), a CRUT (charitable remainder unitrust) or a NICRUT/NIMCRUT (charitable remainder unitrust with net income make-up provisions). This type of trust is subject to the Rule Against Perpetuities because it is not completely charitable.

Chattel: Any property, movable or immovable, except a freehold estate in real property.

Claims: The right to any debts, privileges or other things in possession of another; also, the titles to anything which another should concede to, or confer on, the claimant.

Closing Costs: Sometimes called settlement costs, these are in addition to the cost of the house.

Codicil: A supplement or addition to a will which is designed to change or add provisions to a will. It is treated as part of the will and executed with the same formality as a will.

Common Disaster: Sudden and extraordinary misfortune which brings about the simultaneous or near-simultaneous death of two or more associated persons.

Contest of a Will: An attempt by legal process to prevent the probate of a will or the distribution of property according to the will.

Contingent Beneficiary: Receiver of property or benefits if the first-named beneficiary fails to receive any or all benefits before his death.

Contract: A legal written agreement that is binding when signed.

Court Order: A written direction by a court or a judge not included in a decree or a judgment and not establishing the rights of parties.

Creditor’s Notice: In probate the statement published stating the decedent’s death and the name of the executor or administrator to whom claims should be presented for payment.

Crummey Trust: A life insurance trust with beneficiary withdrawal provisions that allow gifts to the trust to qualify for the annual gift exclusion.

Curtesy: A widower’s legal interest in his wife’s real and personal property.

Decedent: A deceased person.

Deed: The document that conveys the title from one owner to another.

Defective Grantor Trust: A “defective” irrevocable trust that arises when the grantor retains one or more powers or interests in the trust causing the grantor to be taxed on its income, although the trust is otherwise effective in removing the trust property from the grantor’s estate for transfer tax purposes.

Dependent: A person who is dependent for support upon another; to be distinguished from one who merely derives a benefit from the earnings of another.

Defective Grantor Trust: A “defective” irrevocable trust that arises when the grantor retains one or more powers or interests in the trust causing the grantor to be taxed on its income, although the trust is otherwise effective in removing the trust property from the grantor’s estate for transfer tax purposes.

Devise: To give real property by will.

Distribution: The appointment of personal property (or its proceeds) among those entitled to receive the property according to the applicable statute of distribution or under the terms of the will or trust agreement; to be distinguished from disbursement.

Disclaimer of Interest: The refusal of a person to accept a property interest to which the person is entitled by inheritance, devise or trust. When a disclaimer is made, the property passes as though the disclaimant predeceased the donor.

Donee: The recipient of a gift or bequest.

Donor: One who makes a gift or transfer of property voluntarily.

Dower: A widow’s legal interest in her deceased husband’s real and personal property.

Dynasty Trust: A long-term trust that can be structured to last for successive generations, while not running afoul of the Rule Against Perpetuities. Arkansas limits noncharitable trusts under the Uniform Statutory Rule Against Perpetuities, codified at Ark. Code Ann. §§ 18-3-101–109. However, approximately one half of the states have abolished the Rule Against Perpetuities with respect to trusts. Others have allowed long life spans for trusts.

Earnest Money: Deposit money paid by the buyer to indicate that he is serious about wanting to buy. The amount may vary.

Easement Rights: The right an owner gives a person or company to use the property in a specified way. For example, a neighbor may be given the right to use a driveway.

Electing Small Business Trust (ESBT): A trust which qualifies as an S corporation shareholder. There are certain requirements that must be met in order for a trust to be an ESBT.

Escheat: Reversion of property to the state when a person dies without a will and with no legal heirs.

Escrow: Money given a third party may be held in escrow for payment of conditions to be met, for example, to complete work on the house or yard. Money for taxes may also be held in escrow.

Estate: All real and personal property owned by a person.

Executor (Executrix): A person or institution named in a testator’s will to carry out the provisions and directions of the will.

Fee Simple: Absolute title to property with no limitations or restrictions regarding the persons who may inherit it.

Fiduciary: A person or institution given legal responsibility to act on behalf of an individual to perform certain tasks. For example, a trustee (see definition) serves as a fiduciary when she manages real or personal property in an individual’s trust. An executor/executrix (see definition) of an estate serves as a fiduciary when he/she manages real or personal property of that estate. A guardian (see definition) serves as a fiduciary when he manages either “the physical care” or “real or personal property” or both for the benefit of a minor or an incapacitated person.

Gift: A voluntary transfer or conveyance of property without consideration or for less than full and adequate consideration based on fair market value.

Generation Skipping Transfer Tax: A transfer tax generally assessed on transfers to grandchildren, great grandchildren and others who are at least two generations younger than the grantor. There is an exemption available to offset transfers of this type that can be used by an individual during life or at death.

Grantor Trusts: For federal income tax purposes, a trust in which the grantor, or someone other than the grantor, is treated as the “owner” of the trust and is required to report all income on his or her own income tax return (and pay taxes) each year. The grantor (or someone other than the grantor) is treated as “owner” of the trust if he or she retains certain interests in the trust or certain powers over the funds within the trust.

Guardian: An individual or a trust institution appointed by a court to care for the property or the person (or both) of a minor or an incompetent person. When the guardian’s duties are limited to the property, she is known as a guardian of the property; when they are limited to the person, she is known as a guardian of the person; when they apply both to property and to the person, she is known merely as a guardian. In some states the term committee, conservator, curator or tutor is used to designate one who performs substantially the same duties as those of a guardian.

Heir: A person who succeeds the decedent in ownership of the decedent’s property where there is no will.

Holographic Will: A will entirely in the handwriting of the testator.

Incidents of Ownership: A variety of rights or powers that an individual may have held to property, especially regarding life insurance policies, that will serve to bring the proceeds into that individual’s estate upon his or her death.

Income Beneficiary: A beneficiary of a trust who is entitled to receive income from it.

Income in Respect of a Decedent (IRD): Income earned by a decedent or income to which the decedent has a right prior to death, but was not property to be included in his or her gross income prior to death. For example, a retirement account.

Inter vivos Trust: A trust created while the grantor is alive, as opposed to a testamentary trust. Sometimes used synonymously with living trust, although an inter vivos trust may be irrevocable.

Intestate: Having no valid will; a person who dies without having executed a valid will.

Irrevocable Life Insurance Trust (ILIT): A trust designed to own and be the beneficiary of life insurance on the life of the grantor (or another person). Life insurance proceeds payable on the death of the grantor are excluded from the grantor’s gross estate.

Joint Tenancy: A form of property ownership in which two or more parties hold an undivided interest in the same property which was conveyed under the same instrument at the same time. With rights of survivorship: a joint tenant can sell his interest, but he cannot dispose of it by will; upon the death of a joint tenant, his undivided interest is distributed among his surviving joint tenants.

Kin: Persons of the same blood or members of the same family.

Kind: In the phrase “distribution in kind,” distribution of the property itself and not the cash value of the property.

Last Will and Testament: A legally enforceable declaration of a person’s wishes regarding matters to be attended to after her death and not operative until her death; usually but not always relating to a property; revocable (or amendable by means of a codicil) up to the time of her death or loss of mental capacity to make a valid will. Originally, “will” related to real property; “testament” to personal property; but at the present time, “will” is equally applicable to real and personal property.

Laws of Descent: Laws governing the descent of real and personal property from ancestor to heir; to be distinguished from laws, rules or statutes of distribution governing the disposition of property by will.

Legacy: A gift, usually of personal property, made by will.

Lien: A claim against property, real or personal, for satisfaction of a debt.

Living Will: A legal document that describes your treatment preferences in end-of-life situations.  This document must be in writing, signed and witnessed by two persons.  This is a declaration or statement that will tell your physician and family what you want done in medical treatment if you become terminally ill or permanently unconscious.

Marital Deduction: The unlimited deduction allowed under federal estate tax law for all qualifying property passing from the estate of the decedent to his or her surviving spouse. The value of the property passing to the surviving spouse under the marital deduction is “deducted” from the deceased spouses’ estate before federal estate taxes are calculated on the estate. Proper planning and use of the deduction allows more property to pass estate tax free to the family.

Marital Deduction Trust: The trust which holds the property qualifying for the estate tax marital deduction. Property in the marital deduction trust will be included in the surviving spouse’s estate (for transfer tax purposes) when he or she dies.

Marital Rights: The rights that husband and wife have in each other’s property.

Mortgage: The written agreement pledging property to a creditor for a loan.

Mortgagee: Is the person to whom the property is mortgaged and who has loaned the money.

Mortgagor: Is the person who makes the pledge and is receiving the money.

Non Compos Mentis (Not of sound mind): A term that includes all forms of mental unsoundness.

Per Capita (By the head): A term used in the distribution of property; distribution to persons as individuals (per capita) and not by representation or through an ancestor (per stirpes). For example, “I give my estate in equal shares to my son A and to my grandsons C, D and E (the sons of my deceased son B) per capita.” C, D and E take as individuals (not as the sons of B), each taking the same share as A, namely, one-fourth of the estate.

Perpetual Care Trusts: A perpetual trust that allows for the care of cemetery plots.

Per Stirpes: By right of representation. The legal means by which the children of a descendant, upon the death of an ancestor, receive the share of the ancestor’s estate which their parent would have received if living.

Personal Property: Tangible property such as clothing, furniture and automobiles; and intangible property such as stocks, bonds, life insurance and bank accounts.

Pet Trust: A trust that allows for the care of animals that were alive during the grantor’s lifetime.

Petition: A written prayer or request to a court or to a judge for the granting of some remedy for relief.

Portability of the Estate Tax Exemption: Portability of the federal estate tax exemption between married couples means that if the first spouse dies and the value of his or her estate does not require the use all of his or her federal exemption from estate taxes, then the amount of the exemption that was not used for the deceased spouse's estate may be transferred to the surviving spouse's exemption so that he or she can use the deceased spouse's unused exemption plus his or her own exemption when the surviving spouse later dies.

Pour-Over Will: A will that contains a clause that transfers some or all of the assets that pass through a will into a trust. The assets are said to “pour over” into the trust.

Power of Appointment: The power given to a person (a donee), in a non-fiduciary capacity, to designate recipients of beneficial ownership interests in property (appointive property). Powers of appointment are almost always created either by trust or by will.

Probate: Official proof of the validity of a will; the legal process designed to protect and administer a decedent’s estate.

Qualified Subchapter S Trust (QSST): A trust that may be the owner of stock in an eligible S corporation.

Qualified Terminable Interest Property Trust (QTIP): A form of marital deduction, this type of trust provides the surviving spouse with all trust income for life, but no restricted power to direct the disposition of the trust upon his or her subsequent death.

Real Property: Land and things attached thereto, such as buildings.

Sibling: Children of the same parents.

Special Minor’s (Section 2503 (c)) Trust: A trust for the benefit of a minor, contributions to which qualify for the annual gift tax exclusion. See I.R.C. § 2503(c).

Special Needs Trust for the Disabled: Also called a “Supplemental Needs Trust” or “SNT.” A trust established for a person who is receiving government benefits, providing funds for that person’s benefit without disqualifying him or her from receiving those benefits.

Spendthrift Trust: A spendthrift trust prevents both voluntary and involuntary assignment of the beneficiary’s interest to creditors. A spendthrift provision may not always be valid, as, under the ATC, when the beneficiary of the trust is also the grantor.

Split Gift: Each spouse is entitled to give any individual an amount equal to the annual gift exclusion ($12,000 in 2007); however, spouses must make a split gift election on their gift tax return in order to be able to make use of both individuals’ annual gift tax exclusion.

Springing Power: A power to act on the occurrence of some specified criteria, such as an illness or incompetency. The power is said to “spring” into existence upon the occurrence of an event.

Sprinkle or Sprinkling Power: The power given a trustee to decide how, when and why to distribute trust income to the trust’s different beneficiaries. The sprinkling power allows the trustee to “sprinkle” the trust income upon the beneficiaries. This trust also allows the trustee to distribute income to the beneficiaries who will pay the smallest amount of income tax on the distribution.

Step Up in Basis: With some exceptions, property passing to heirs, devisees or beneficiaries will receive a new basis that escapes the capital gains tax when that property is subsequently sold. Such persons receiving capital gains property receive the property at the date-of-death fair market value. The basis in this property is “stepped up” and does not reflect the decedent’s original cost basis in determining capital gains taxes.

Statute: A law.

Statute of Limitations: A statute which bars suits upon valid claims after the expiration of a specified period of time. The period varies for different kinds of claims. Each state has its own statute of limitations.

Succession: The act or fact of a person’s becoming entitled to property of a deceased person, whether by operation of law upon his dying intestate or by taking under his will.

Tenancy-by-the-Entirety: A type of joint tenancy between husband and wife which is recognized in some states, including Arkansas. This type of ownership is characterized by the fact that neither party can sever the joint-tenancy relationship. Upon the death of one spouse, the survivor acquires title to the property.

Tenancy-in-Common: A type of property ownership in which two or more persons hold undivided interests in the same land with no right of survivorship. However, each tenant-in common can sell or divide his share.

Testate: To die leaving a valid will.

Testator (Testatrix): A person who makes or has made a will.

Testamentary Trust: A trust created by will.

Title Insurance: Special insurance against loss due to a flaw in the title.

Transfer on Death (TOD) Designation: Registration of securities or brokerage accounts providing that, upon the account holder’s death, the securities or accounts will pass to a designated beneficiary.

Trust: An arrangement made during life or under the terms of a will by which a property interest, real or personal, is held by one person for the benefit of another.

Trustee: A person or institution holding and administering property in trust.

Trustor: A person who makes or creates a trust.  Also known as the grantor or settlor.

Will: A legal declaration of the manner in which a testator wishes to distribute her estate after death.